Cuban Economy Is Still Stagnant Despite Reforms: Cuban National

"The United States is the ceiling of heaven," says Cuban national.

Our source noted that the large, state-owned restaurants cannot compete with the smaller, privately run restaurants, which offer better service and better food. In fact, at least according to an AP report (via Huffington Post), the government may begin renting state-owned restaurants in hopes of improving the quality of the restaurants. The Communist Party newspaper Granma published an article in which the Interior Commerce Vice Minister Ada Chavez Oviedo said that a pilot program will begin on December 1 in three of Cuba's fifteen provinces: Artemisa, Villa Clara, and Ciego de Ávila. State-owned restaurants suffer from theft of food by the workers. The renters will be responsible for the maintenance, the repairs, and the utilities of the restaurant. The government has also started similar policies for beauty salons and barber shops.

Our source elaborated on the business structure of a private restaurant:

Restaurateurs can either grown their own food or purchase food from farmers. All farmland is state owned, and the government only leases pieces of government registered land to individuals such as farmers or restaurants owners. The government calls this "Uso Frutus Gratis," or free use of the fruit of you labor. The land is never yours, though. Plus, a contribution (a sort of tax) from the harvest must be paid to the state for the funding of institutions such as hospitals and schools. [The government may begin experimenting with new land cooperatives.]

Despite the possibility of renting land, most restaurants owners have to purchase produce from farmers in the marketplace. Those who sell food in the marketplace can charge whatever price they want, making their oferta de mando, or offer of demand. Problems occur because the lack of a fixed price allows sellers to charge whatever price they wish and constantly change prices. When you go to a market, farmers will begin competing on price, constantly undercutting each other."

Our source's description of the interactions in a local market indicated that market mechanisms may still seem alien to some Cubans.

When asked about any popular restaurants in the country, our source said that no restaurant franchises existed and restaurants varied from city to city. On the topic of available, affordable food, our source called the US "the ceiling of heaven" and frequently referenced the prevalence and proliferation of McDonald's (NYSE:MCD) and Starbucks (NASDAQ:SBUX).

Rationing and the Black Market

Our source reasoned that the government allowed a black market to exist out of fear of civil unrest if the people's basic needs are not met. The government will step in, though, if it believes a person has become reckless or too conspicuous with one's wealth, he said.

The state-run rationing system provides little for the average Cuban. Similar to starting a business, one needs money to acquire anything other than basic necessities. Our source said, "Every head of the household gets a rationing booklet from the government that covers essentials. The book lists what may be collected from the government throughout the year. For example, Cubans may only get one pair of underwear and one pair of shoes per year from the government. However, the shoes may be the wrong size."

Frequently, the government will run out of a particular good. The US-Cuba Trade and Economic Council in its "Report for Calendar Year 2011" states that ration cards are supposed to supply food for 30 days, but may only provide 14 days worth of food.